Mapgirl’s Fiscal Challenge

As I reflect more and more on what happened to the guy in Maryland who can barely afford his housing costs as taxes and insurance costs rise, I am wondering how he got into this mess.

I’m a big proponent of radical personal responsibility. As much as I whine on this blog, I know that my spending is MY problem. It’s not something I can blame upon anyone else as I make my choices. S.A.D.D. used to stand for “Students Against Drunk Driving”, but now it stands for “Students Against Destructive Decisions” because it applies to all areas of life. I think financial literacy is a life skill that should be taught at home and at school since destructive financial decisions can have just as much long-term impact as taking drugs or drunk driving. Unlike chronic alcoholism, where your liver could be permanently destroyed, usually poor credit can be repaired in two-three years.

CNN had an article about who to blame for the current mortgage crisis (which unfortunately I can’t find right now). Of course they said borrowers were to blame, but then they went into a litany of other parties like mortgage bankers, appraisers, and the Fed, etc. It was cutting a wide swath, but really, it boils down to the people who sign all the freakin’ papers at settlement. I admit, the Truth-in-Lending sheet you get is still pretty damned confusing. Even for someone with a higher level of education, I sure was still confused. However, the first people and the people who MUST acknowledge their part in the a mortgage debacle are the buyers themselves.

The American Dream of owning your own home is powerful and strong. The government encourages it with a huge tax incentive on mortgage interest. The notions of ‘Home Sweet Home’ and carving out a space of your own are psychologically extremely potent. No wonder it’s easy to get sucked into buying a home when everyone else is doing it and seems really gosh darned happy about fulfilling their dreams of owning a home.

In 2004, when I bought my home, I think 7 of crowd had purchased properties in the same year. Planning housewarming parties was a b*tch, let me tell ya. All of us were in our late 20’s-early 30’s and starting to slow down and cocoon, etc. I watched my friends buy places that were way bigger than mine. I was envious. But I didn’t let my house envy show by buying something comparable or better. I bought a place I could afford. I still have the smallest place of all. When it looked it I was having a hard time affording it, I got off my duff and pursued more income, which ultimately was a great long-term career move. But it was me. All me. I am the one who asked my parents for financial help and its attendant cultural burdens. I am the one who pays the bills monthly. I am the one who knows what the cash flow is for making the payments. I alone signed the condo documents. I am the one who pays the insurance. I am the one who lives in it. I am the one who decorates it. I am the one who loves living within its walls. I clean it up. I make it a mess.

I return though to the notion that our financial decisions are about our egos, psychology, vanity, black box of issues, whatever you want to call it, whether it’s an aspiration to a lifestyle, an acknowledgment that of our means, or disregarding our means. Buying my place was a bit of fantasy fulfillment for me. I felt that I would be more at peace if I could live without roommates. I felt that I could stand more own my own if I was the solely responsible for everything, rather than splitting costs. It’s been scary and somewhat trying. I was sleepless knowing that I was entering adulthood so completely by signing at settlement. I really don’t know what all these people were thinking when they signed huge mortgages. It had to be more than the money that drove them to these decisions.

I admit freely to being irrational about my financial decisions. Part of why I blog is delve a little into why I do what I do. But when it came to purchasing a home, I tried to be as coldly rational as possible. I ran a LOT of spreadsheets, doing the math. Cutting different scenarios for down payment amounts, interest rates, ARM terms, etc. I couldn’t afford to eff things up. My parents could help with the down payment, but sure as sh*t they couldn’t bail me out if I couldn’t make a payment. I vowed I’d never take another dime from my parents because it was now my turn to give back.

Maybe I am a pessimist and all these people are optimists. I don’t know. All I know is that sometimes I can be really good getting off my lazy butt and taking action when I think things are going badly. It doesn’t happen overnight (well, maybe if you are laid off). A foreclosure proceeding starts happening after 2 missed payments.

A commenter wrote to me that I’m really defensive about comments that aren’t full of praise. Well, whatever. I didn’t write this because I wanted people to tell me how great I am. I wrote this because I really don’t get it. Taking care of business is important and forecasting your future ability to pay is part of getting it done. The numbers don’t lie. I cut a long list of figures trying to assess how much money the man in the article made, and realistically what kind of mortgages could be written on a presumed salary and I couldn’t do it without getting creative and using really unusual loan products. It was really difficult and that’s when it dawned on me that he was really in trouble and he and his mortgage provider brought the situation on themselves. From ten different ways, I just couldn’t get the numbers to add up.

There will be another post shortly about owning up to your actions and making choices.